Overseas aid: giving with one hand…

Credit where it’s due – in his Autumn Financial Statement, George Osborne resisted the calls from his right wing to abandon the cross-party pledge to reach the UN target of spending 0.7% of UK Gross National Income on overseas aid, making this administration the first Conservative led one for 40 years to increase overseas aid (details below.) The UK will, in the next financial year, join a sadly exclusive club (confined to northern Europe) spending what the international community has agreed developed economies should spend.

We welcome that, despite the views expressed by some on the left as well as the right that overseas aid targets are not the be all and end all of international development, and that there are better ways to promote development than aid spending (eg promoting trade, promoting good governance, or tackling tax havens). The TUC has always taken the line that the alternative to raising overseas aid spending to the UN target is unlikely to be good news for the poor in developing countries because it means less money being spent in developing countries. Aid spending saves lives, it can help economies to grow, and it can help deliver quality education.

And here’s the rub: George Osborne will meet the UN target for overseas aid, but the effect of his domestic policies on the UK economy means that the amount of money going overseas will be less than expected.

Speaking after the Chancellor’s Autumn Statement, International Development Secretary Justine Greening said:

“The Coalition Government has today reaffirmed its commitment to the world’s poorest people by confirming the UK will spend 0.7% of Gross National Income (GNI) on international development from 2013. We will be the first G8 country to do so.”

The problem is that GNI is declining, so although the proportion of GNI being spent overseas rises from 0.56% this year to 0.7% in 2013 and 2014, UK aid spending will be £680m less in those two years than if GNI stayed the same, as shown in table 2.2 of the Autumn Financial Statement 2012.

And if the UK economy was healthy, it should be growing by 2-3% annually at this stage of the economic cycle, so aid should actually be increasing over that period by £430m-650m (a total shortfall over two years of around £1.7bn, as the UK Aid Network claimed.) In that context, George Osborne’s declaration on Wednesday that he would definitely not spend more than 0.7% was a tad less than generous.

As my colleague Richard Exell pointed out, these figures mean that more than 5% of the cuts in departmental expenditure announced on Wednesday came from overseas aid: from people even poorer than those in the UK who bore the brunt of domestic cuts.

I almost forgot – here are those figures on government spending on overseas development aid (ODA), against the 0.7% target adopted in 1971. The Labour Government of 1974-79, despite torrid economic times, raised overseas aid spending from 0.4% to 0.51% – a tribute to the late Judith Hart. Had spending stayed on that trajectory, we would have reached the target by 1988. But the Thatcher/Major government of 1979-97 saw ODA fall from 0.51% to 0.26%. It took Blair and Brown 13 years to get aid levels back up to 0.56% by 2010 – a slightly faster rate of increase than in the Wilson-Callaghan years.

Written by Owen Tudor

I’ve been the Head of the TUC’s European Union and International Relations Department since 2003 and have worked at the TUC since 1984. I’ve been a member of the Health and Safety Commission, the Civil Justice Council, the Social Security Advis…